Professional Documents
Culture Documents
Listed|Fall 2014
Ira Millstein
Ira Millstein, a man whose name is practically synonymous with corporate governance, issues a passionate
reminder: its the peoples money that funds corporations and governance exists to protect it
Photography by Joe Leavenworth
Ira Millstein
Primary role
Senior partner, Weil, Gotshal & Manges LLP
Additional roles
Adjunct professor, Columbia Law School and Columbia Business School; chair, Millstein Center for Global Markets and
Corporate Ownership; chair, Governors Task Force on the implementation of the Public Authorities Reform Act (New
York State); member of the bar, U.S. Supreme Court, U.S. Court of Appeals (1st, 2nd, 3rd, 4th, 9th and Federal Circuits) and
New York State
Former counsel on corporate governance to the board
General Motors Corp., Westinghouse, Bethlehem Steel, CalPERS, Tyco International, The Walt Disney Co., The Ford Foundation,
The Nature Conservancy and Planned Parenthood Federation of America
Former roles
Senior associate dean for corporate governance, Yale School of Management; co-chair, Governors NYS Ready Commission
(New York State); chair, New York State Commission on Public Authority Reform; chair, Private Sector Advisory Group to
the Global Corporate Governance Forum; chair, OECD Business Sector Advisory Group on Corporate Governance; chair,
New York State Pension Investment Task Force; chair, Central Park Conservancy; adjunct professor, New York University
School of Law; fellow of the Faculty of Government, JFK School of Government, Harvard University
Education
B.S. (Engineering), Columbia University (1947); J.D., Columbia Law School (1949)
Honours
kNamed Best Lawyer for antitrust, corporate compliance, corporate governance, corporate
and securities/capital markets law (Best Lawyers in America)
k2012 International Whos Who of corporate governance lawyers
kNew Yorkers for Parks 2012 Legacy Award for role in revitalizing Central Park
kElected fellow, American Academy of Arts & Sciences
kInaugural recipient, Award for Excellence in Corporate Governance, ICGN
kNamed to the list of 100 Most Influential Lawyers in America, National Law Journal
Current age
88
37
Fall 2014|Listed
Ira Millstein
ist for our benefit. Its through our investments that we provide the fuel
for the whole system. Whatever happens after we invest our money,
we will be forced to live with the outcome, because we are the intended
beneficiaries of this system. This is so important for our population to
understand that Im writing a book on it now. We cant lose sight of the
fact that working people are the actual owners of capital and the very
people who are relying on corporations to create value for the long run.
I think this is the critical link in the story of capitalism and corporate
governance.
David W. Anderson Whats your assessment of how well working
tual funds, with their huge fees and lacklustre results? Not everyone
is going to read John Boglethough they should because hes got it
right. Moreover, do these mutual and hedge funds all care about the
corporations in which they invest, or are some simply playing with
stock certificates? The public should understand enough to make better decisions themselves and support corporate governance practices
that exist for their protection. A lot of people get hurt when corporate
governance doesnt work right.
David W. Anderson How then does corporate governance offer
protection?
Ira Millstein I want people to understand this in personal terms. The
39
Fall 2014|Listed
Ira Millstein
some hedge funds are value investors but others are playing the market. I dont understand why pension funds dont see this and pick out
the right hedge funds. I think a pension fund ought to be able to discern
what the hedge fund is doing and invest only in those that are using
money to improve the board and management, not just gambling.
On the other side of the equation, Id also hope that corporations
would be able to discern who, as investors, are coming in to upset them
or improve their management. I dont like seeing corporations throw up
walls and unnecessarily create staggered boards or poison pills to keep
ideas and people away. I can see that a corporation may want some leverage in dealing with investors, but more often these tools are used to
block genuine performance improvement.
Finally, Im tired of seeing boards be so frightened of missing a quarterly earnings expectation that they wont invest in the future. Weve
got to get past the mantra of quarterly returns. Why dont boards stand
up for a long-term, growth-oriented model and convince shareholders
of what is right? Ive known large companies such as IBM and Verizon
that missed many quarters to change themselves into something that
would endure. It cost them during the transition but they had shareholders who believed in their strategy and were patient through the
transition. Those boards and their shareholders prioritized long-term
over short-term considerations. I fault corporations that are fearful of
doing this. I see it as a message when they cant demonstrate theyre
on the right tack.
David W. Anderson Youve been legal counsel to major boards as
theyve charted new courses in corporate governance and reshaped the field. What contributions to the evolution in corporate governance are you most proud of?
Ira Millstein Id choose two: the practice of independent directors
meeting alone in executive sessions and the establishment of board
leadership independent of the CEO. When John Smale and Harry
Pearce turned GM around years ago, the idea of independent directors
meeting alone was unheard of. It was seen as treason against the CEO.
GMs board had never met alone as just the independent directors to
discuss GMs business performance and its leadership, as they were
afraid of what management would say. Smale recognized that the directors were not open and candid with management present and said
were not going to be an effective board unless we meet without management. I helped him craft the rules for meetings of the independent
directors. Similarly, we created independent board leadershipeither
in the form of the board chair or lead directorto run the business of
the board. The person who runs the board should sit at the head of
the table separate from the CEO and set the agenda. These initiatives,
which transformed the practice of governance, were not invented in a
law school. They came from inside a boardroom created by business
people who understood what they had to do to get it right. Business
people came up with these ideas and they spread like wildfire.
David W. Anderson The professional basis of your work with
business people is the practice of law. Whats the unique contribution to corporate governance that legal minds bring?
Ira Millstein Nothing unique. You are highlighting one of the problems
with the system. Very few business schools teach corporate governance, but many law schools do. How did corporate governance wind
up in the hands of those who dont run corporations? Corporate governance should be controlled by business people, not lawyers. Directors
tell me all the mega rules that today are corporate governance have
little to do with a good board. Quality governance has to do with the
quality of directors: Do they know the business? Do they work together to take risks and operate transparently?
When I look at a board, I ask myself, Is this a group that will work
together to make the corporation better? I dont like outsiders interfering in business decisions. Who knows better than the directors and executives? Boards shouldnt get caught up in rules and external dictates.
Let the directors talk to their management and get on with the business
of businessunderstanding their business model and market, managing finances and raising capital. Would you have to give business people
a rulebook to run their company? Of course not. Yet we have detailed
rules and regulations that proxy advisers focus on that are too often inventions of the legal community. Lawyers arent trained to understand
the essence of how business works. Their focus should be on human
qualities, because thats what matters.
me to talk about good governance and remind them of what rules to follow. I said, No, you dont need to hear that from me because youre a really good board. I can see it. You are talking and arguing the points and you
know this business. By virtue of the fact you asked me to come in and you
take minutes you are exercising due care, and you are not operating for
your own interest, so you are doing exactly what you should be doing.
They had a staggered board and its working fine for them. My advice
was that if some proxy adviser says vote against this practice, say no
and explain why you do what you do. Similarly, a poison pill isnt always
bad, especially if the wrong guy comes knocking. My only advice would
be to keep it as simple as possible, so its not a dead hand. The bottom line
is this: legal advice is good if directed at the principles involved. Duty of
care and loyalty are about whats happening in the market, and I have
confidence that business people know that.
David W. Anderson, MBA, PhD, ICD.D is president of The
Anderson Governance Group in Toronto, an independent
advisory firm dedicated to assisting boards and management teams enhance leadership performance. He advises
directors, executives, investors and regulators based
on his international research and practice. E-mail:
david.anderson@taggra.com. Web: www.taggra.com
41
Fall 2014|Listed